Arctic Cat: A Chilly Reminder Regarding Licensee Marking

Monday, February 12, 2018

In order to make the most of a patent investment, consumer product companies must put competitors on notice of their patent rights. Specifically, a patentee who makes or sells a patented article must mark their articles or actually notify infringers of their patent in order to recover damages. By marking products in the marketplace – and by requiring licensees to do so as well – patent owners can effectively put potential infringers on constructive notice and start the damages clock.

The Federal Circuit recently addressed several patent marking issues in Arctic Cat Inc. v. Bombardier Recreational Products Inc., including whether a patent owner or its licensee bears the burden of determining whether a product is covered by a patent and should therefore be marked.[1] In a case of first impression, the court also determined whether the infringer or the patentee has the “initial burden of production to articulate the products it believes are unmarked ‘patented articles’ subject to § 287.”[2]

In Artic Cat Inc., plaintiff Arctic Cat sued defendant BRP for infringement of two of its patents covering a thrust steering system for personal watercraft (PWC) propelled by jet stream.[3] Before trial, BRP unsuccessfully moved for summary judgment on the issue that Arctic Cat’s sole licensee, Honda, failed to mark the PWCs it produced as required by § 287.[4] On appeal, the parties disputed whether the PWCs sold by Honda were actually patented articles that were required to be marked and whether Honda’s failure to mark certain products limited Arctic Cat’s damages.[5]

The court explained that it is the patentee’s burden to ensure that its licensees comply with the marking requirements of § 287, and that patentees should “[make] reasonable efforts to ensure compliance with the marking requirements.”[6] In this case, the licensing agreement between Arctic Cat and Honda explicitly stated that Honda had no obligation to mark its licensed products, and Arctic Cat took no steps to make sure these products were, in fact, marked properly.[7] Accordingly, the court held that Arctic Cat failed to satisfy the marking requirements.[8]

Because the court found that the marking requirement had not been satisfied, the remaining issue was whether the unmarked products sold by Honda were covered by the patent claims at issue.[9] In denying summary judgment for BRP, the district court held that the burden of proving compliance was placed on the defendant.[10] However, the Federal Circuit disagreed, holding that “the burden of proving compliance with marking is and at all times remains on the patentee.”[11] The court further held that, even though the burden of proving compliance falls on the patentee, the alleged infringer has an initial burden of production to “articulate the products it believes are unmarked.”[12] Here, the court found that BRP had satisfied this initial “low bar”.[13] Accordingly, the Federal Circuit vacated the district court’s judgment and remanded so that Arctic Cat could establish whether the identified Honda PWCs did not practice the asserted patents.[14]

This case serves as an important reminder for companies to require licensees to mark products covered by their patents, either contractually or through other “reasonable efforts.” A licensee’s failure to mark products may limit damages recoverable from a potential infringer. Making “reasonable efforts” to ensure compliance with the marking requirement may also simplify patentee’s burden of proving compliance when, at trial, an infringer identifies products it believes are unmarked.

Mark Rygiel, a director in the Mechanical Group, counsels a broad spectrum of entities ranging from large multi-national companies to small start-ups in developing IP strategies and protecting new technologies. Mr. Rygiel specializes in obtaining utility and design patent protection for cutting edge technologies in the consumer product, vehicle system, medical device, manufacturing, and e-commerce industries. His practice also focuses on complex post-grant proceedings at the USPTO, analyzing patents for validity, infringement, and freedom-to-operate issues and providing related opinions...

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